Contesting Trade in Central America: Market Reform and Resistance

Notes

Notes Introduction 1. The Dominican Republic was added to the agreement in the final stage, making the official acronym CAFTA-DR. Since my study focuses on Central America and includes analysis of negotiation processes prior to the addition of the Dominican Republic , I use the acronym CAFTA, as is common in Central America. 2. Use of Polanyi’s conceptual framework in this study is not meant to deny the unresolved tensions and anachronistic claims that inhabit his analysis. See Block (2003). 3. Bowman, Lehoucq, and Mahoney (2005) constructed a long-range evaluation of Central American democracy using a procedural definition based on five dimensions (freedom of press and association, free and fair elections, inclusive participation, civilian supremacy, and national sovereignty). Their “BLM Index” assessed democracy levels in each Central American country by year from 1900 to 1999 and concluded that all three were democratic, with Costa Rica becoming democratic (index score of 1) in 1958, Nicaragua in 1990, and El Salvador in 1995 (965–967). 4. The present study adopts a conventional approach to the concept of civil society , defining it as those forms of formal and informal association that are neither private (business or familial) in character nor part of formal political institutions involved in governance (political parties, government offices, etc.); see Macdonald (1997, 3). Chapter 1 1. Morley, Machado, and Pettinato (1999) measured “reform effort” in relation to the level established by the region’s leader in a particular year (designated as 1). This measurement device allowed standards to be set by regional rather than absolute indicators. 2. Scores were based on indicators for trade (tariff averages and dispersion), finance (reserve requirements and interest rate freedom); taxes (maximum marginal income tax rates, value-added tax rate, and a measure of efficiency in tax collection); privatization (cumulative value of sales and transfers as percentage of GDP), and labor 248 Notes to Pages 21–38 flexibility (cost of hiring, firing, social security, and extra workdays and hours). Performance was scored from 0 to 1 based on the “worst” and “best” observations for each policy variable across the whole sample of countries and years. The summative score averaged the indices across the five policy areas (Lora 2001, 19). 3. Note that a third database, the Index for Economic Freedom, developed by the Heritage Foundation and Wall Street Journal (www.heritage.org), uses yet another set of indicators that give more weight to government spending, property rights, and corruption. That method produced 1999 scores of 67.4, 75.1, and 53.8 for Costa Rica, El Salvador, and Nicaragua, respectively. According to that source, Nicaragua was the group laggard, not leader, due to greater government spending relative to GDP, weaker property rights, and higher corruption estimates. 4. Large-N studies of IMF lending have linked program initiation to low international reserves, high inflation, and/or heavy foreign debt obligations (Pop-Eleches 2009, 56–57, 67–79). Remmer’s (1998) quantitative analysis of ten South American countries over a fourteen-year period, for example, confirmed the link between low international reserves and the initiation of market reform. She also found a link between higher levels of international aid flows and the durability of market reforms. 5. Robinson’s (2003) study of market reform in Central America gives particular attention to the catalytic role played by USAID. With greater agility and range than international financial institution (IFI) counterparts, USAID moved quickly to advance structural adjustment, packaging standard economic policy reforms together with educational, legal, and civil society programs that supported pro-market transitions. 6. In an institutionalist variation, Pop-Eleches’ (2009) study of IMF lending in twenty-one Latin American and twenty-six Eastern European countries demonstrates that the IMF gave preferential treatment to larger economies, whose size implied a system-wide impact in the event of prolonged distress, a preference found to be consistent with the organization’s mandate to stabilize the international economic system. 7. In the Chilean case, business leaders were delegated to take charge of specific aspects in the Mercosur negotiation (Schneider 2004, 228). 8. Costa Rica’s score on the Morley, Machado, and Pettinato (1999, table A-2) commercial policy index was .511 in 1970, slightly above (more open than) the regional average of .501. The Central American Common Market, which Costa Rica joined under pressure from the Kennedy administration, had high external tariffs, and by 1973, Costa Rica’s trade openness scores began to fall behind the Latin American average, a gap that widened until 1986. 9. Data...